This year’s inflation uptick will result in the biggest hike in Social Security benefits since 2023, according to estimates, with the official number due next month.
The annual cost-of-living adjustment (COLA) is based on a subset of the consumer price index, known as the Consumer Price Index for Urban Wage Earners and Clerical Workers. By extrapolating from recent months’ data and projecting where the September print will land when it comes out on Oct. 14, advocacy groups already have a good idea of what to expect.
For instance, the Senior Citizens League estimated the COLA for 2027 will be 3.5%, while the AARP projected a 3.6% hike. Either way, that represents a significant upgrade over 2026’s COLA of 2.8% and the most since 2023’s massive 8.7% jump, when post-COVID inflation and supply shocks collided with Russia’s 2022 invasion of Ukraine that spiked energy prices.
This time, it’s a different conflict driving oil prices up: President Donald Trump’s war on Iran. As a result, Mideast fighting, coupled with Ukraine’s attacks on Russian refineries, have sent fuel prices even higher. The price of diesel in the U.S. has topped $6.50 a gallon, rippling through anything that’s shipped, harvested or manufactured with the critical industrial fuel.
At the same time, the AI boom has created its own supply crunch for chips and other key technology inputs. Makers of consumer electronics, such as Apple, have raised prices recently as costs climb.
And for good measure, Trump hasn’t given up on his trade war. Despite the Supreme Court striking down his duties under the International Emergency Economic Powers Act, he has used other laws to invoke new tariffs and hiked levies on Canada in July. Earlier this month, Congress also gave Trump new authority to impose 100% tariffs on the top consumers of Russian energy.
Don’t forget more expensive beef, insurance, and utilities—the list goes on. Add it all up, and Social Security must pay out more to beneficiaries so they can keep up with their ever-growing bills.
While all recipients get the same percentage COLA regardless of where they live, those who earned more during their working years receive bigger checks, meaning their annual adjustments are bigger too.
Nationwide, the average monthly benefit for a retired worker is $2,071, according to the Social Security Administration. But the typical check within some states is higher than the U.S. average.
By that measure, retirees in New Jersey have the highest median Social Security check and get $2,256 a month, according to a Motley Fool tally of Social Security data. Based on the COLA estimates for 2027, they should see about $79-$81 more versus $72.49-$74.56 for the nationwide average.
The Garden State is followed by Connecticut ($2,249), Delaware ($2,225), New Hampshire ($2,215), Maryland ($2,181), Washington ($2,144), Michigan ($2,139), Minnesota ($2,135), Massachusetts ($2,121), and Utah ($2,090).
Wealthier retirees are already a major driving force in the U.S. economy, which has remained resilient despite repeated shocks.
In fact, Wall Street veteran Ed Yardeni has dubbed it the G-shaped economy, arguing the notion of a K-shaped economy divided by class obscures a trend divided by generations.
Helped by an extraordinary era of financial and economic gains, baby boomers now have a net worth of nearly $90 trillion, or about 52% of all U.S. household wealth. The Silent Generation, which holds another $20 trillion, is expected to pass much of that on to their boomer kids.
“The concentration of wealth among older generations suggests that consumer spending is increasingly being supported by the spending of accumulated retirement wealth rather than labor income,” Yardeni explained in a note last month.
Indeed, boomers control about 54% of household stocks and mutual funds, worth close to $30 trillion, and own 41% of all household real estate, more than any other generation.
That’s why boomers can keep spending briskly despite high interest rates and inflation, he said. On top of that, higher interest rates actually work in their favor as investments in fixed-income products like Treasury bonds now yield more.
“This dynamic helps explain why higher interest rates have done less to restrain consumer spending than many economists anticipated,” Yardeni added. “For a large segment of the population, rates are not simply a cost of borrowing. They are also a source of income and the reason that home prices are rising!”
This year, an increase in inflation is expected to lead to the largest hike in Social Security benefits since 2023, with the official adjustment figure anticipated next month. The annual cost-of-living adjustment (COLA) is calculated using a specific subset of the Consumer Price Index (CPI), known as the Consumer Price Index for Urban Wage Earners and Clerical Workers. Based on recent data and projections for September, advocacy groups have provided preliminary estimates for the COLA in 2027, with the Senior Citizens League predicting a 3.5% increase and AARP estimating a 3.6% hike. This represents a significant increase over the 2.8% adjustment in 2026 and is notable compared to the substantial 8.7% boost in 2023, which was influenced by post-COVID inflation and geopolitical tensions, particularly Russia’s invasion of Ukraine.
Currently, the inflationary pressures are driven by a different geopolitical conflict, specifically tensions involving Iran, which have led to rising oil prices. Additionally, the ongoing situation in Ukraine, where attacks on Russian refineries have disrupted supply, has contributed to soaring fuel costs, with diesel prices in the U.S. exceeding $6.50 per gallon. This increase impacts various sectors reliant on diesel for shipping and manufacturing. Coupled with these factors, the rapid growth of artificial intelligence (AI) has created a supply crunch for essential components like microchips, causing consumer electronics manufacturers, including major companies like Apple, to raise their prices.
In addition to these influences, former President Donald Trump’s trade policies continue to affect prices, as new tariffs and levies have been introduced, including a recent authorization from Congress allowing significant tariffs on Russian energy imports. The overall rise in costs affects many areas, including food, insurance, and utilities, necessitating higher Social Security payments to help beneficiaries manage their increasing expenses.
All recipients of Social Security receive the same percentage COLA increase, but those with higher lifetime earnings receive larger benefits, making the adjustments more substantial for wealthier retirees. As of now, the average monthly benefit for retired workers is approximately $2,071, but this varies by state. New Jersey has the highest median Social Security check at $2,256, with estimated COLA increases translating to an additional $79-$81 per month for residents. Other states with significant median benefits include Connecticut, Delaware, and New Hampshire.
The financial resilience of wealthier retirees is evident in the broader U.S. economy, which has shown remarkable stability in the face of economic challenges. Economist Ed Yardeni has characterized this economic landscape as a « G-shaped economy, » highlighting how wealth accumulation is increasingly divided by generational lines rather than traditional class distinctions. Baby boomers, in particular, have amassed a vast net worth of nearly $90 trillion, accounting for approximately 52% of total U.S. household wealth. The Silent Generation, holding another $20 trillion, is expected to transfer much of this wealth to their baby boomer children.
Yardeni notes that this concentration of wealth among older generations suggests that consumer spending is increasingly supported by retirement wealth rather than labor income. Baby boomers control a significant portion of household financial assets, including 54% of stocks and mutual funds, valued at around $30 trillion, and 41% of all household real estate. This wealth enables them to maintain strong consumer spending patterns despite ongoing inflation and rising interest rates. In fact, higher interest rates can be advantageous for retirees, as they yield greater returns on fixed-income investments, such as Treasury bonds.
This dynamic helps explain why consumer spending has remained robust, contrary to many economists’ expectations regarding the dampening effects of higher interest rates. For a substantial segment of the population, interest rates are not merely a borrowing cost but also a source of income, contributing to rising home prices and sustained economic activity. The interplay of these factors illustrates the resilience of wealthier retirees in the current economic climate, as they leverage their accumulated assets to continue participating actively in the economy.
